Businesses around the country have been slow to evaluate, or quick to assume they are ineligible for, the 2021 Employee Retention Credit (“ERC”). The result: a significant amount of cash is still being paid to the Federal government when it could remain with companies that need it.
In 2021 the maximum amount of ERC is $7,000 per employee, per quarter. Therefore, if a company can identify $10,000 of qualified wages from each employee in the first and second quarter in 2021, they are looking at a maximum ERC of $14,000 per employee. This means that a 10-person business could get a maximum ERC of $140,000 and a 300-person company could generate a $4,200,000 ERC. You get the idea. Big dollars are available for this credit and businesses are missing the opportunity due to lack of understanding, or possibly just COVID burn out.
It is time to bust the myths surrounding the 20201 ERC and highlight the most common misunderstandings.
Myth 1: If my business is eligible for the second draw Paycheck Protection Program (“PPP”), I cannot also benefit from the ERC
While it is true that same $1 of payroll cannot be utilized towards both PPP debt forgiveness and the ERC (along with other stimulus funding), it is still possible to have sufficient payroll to allow an employer to receive both the 2021 ERC and Second Draw PPP debt forgiveness. While some might question whether a business can utilize payroll paid during the Second Draw PPP covered period, the Consolidated Appropriations Act, 2021 (“CCA 2021”) clearly states that the amendment to the PPP program is that payroll costs for PPP debt forgiveness do not include qualified wages taken into account in determining the ERC. This language allows for payroll being used during the Second Draw PPP covered period to be used for the ERC.
Read the entire article at Forbes: https://www.forbes.com/sites/lynnmucenskikeck/2021/02/12/six-myths-surrounding-the-2021-employee-retention-tax-credit